NZ's Synlait Milk plans IPO, taps Chinese infant formula market demand
Chinese controlled-New Zealand dairy company Synlait Milk Ltd is planning a public share offer to fu…Chinese controlled-New Zealand dairy company Synlait Milk Ltd is planning a public share offer to fund an expansion in China's booming infant formula market, tapping into global demand for food-related investments in Asia.
Synlait Milk, 51 percent owned by China's Bright Dairy and Food Ltd, would not specify the size of the IPO, but said on Tuesday it expected Bright Dairy to retain its stake.
The proposed offer follows the launch in November of an NZ$525 million sharetrading fund by Synlait Milk's much bigger rival Fonterra and which has gained nearly 14 percent since it was floated.
Synlait Milk is owned by Synlait Ltd, a private local company and Japan's Mitsui & Co.. Last year, the company launched the Pure Canterbury brand of infant formula in China, the world's largest consumer of milk formula products.
"Milk and dairy products are a hot commodity around the world and this gives people potential access to it," said Brian Gaynor, director of Milford Asset Management, adding he expected strong overseas demand for the IPO.
First NZ Capital and Goldman Sachs have been appointed as joint lead managers for the proposed offer.
Milk powder is used in products ranging from infant formula to cheese, and dairy consumption is expected to substantially increase in Asia as an expanding middle-class adopts a more Westernised diet.
GROWTH IN CHINA
Synlait Milk is one of several small companies operating in China's $12.4 billion milk formula market which has grown 12-fold since 2002 as more mothers join the workforce and spend less time breastfeeding.
Foreign firms such as Mead Johnson Nutrition Co. and Nestle SA expanded their presence in China after a 2008 scandal over tainted infant milk powder that shattered public confidence in Chinese-made milk products.
Synlait Milk CEO John Penno recently told Reuters recently he hoped China would ultimately account for one-third of overall revenues. Fonterra, the world's biggest dairy exporter, also plans to sell its own-brand milk formula in China this year.
Last year, New Zealand supplied 90 percent of the nearly $2 billion worth of milk powder China imported. Chinese firms are also manufacturing in New Zealand to take advantage of strict food safety regulations and improve their sector's reputation.
Dairy heavyweights Inner Mongolia Yili Industrial Group and Yashili International Holdings in April gained approval to build $170 million milk powder processing plants in New Zealand which are expected to start production next year.
Synlait Milk reported a net profit of NZ$6.3 million in the year to July 31 2012, compared to a NZ$3.0 million loss in the previous year, helped by strong growth in the milk powder ingredients business.
